1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Gala2k [10]
3 years ago
6

A stock with a current market price of $50 and a strike price of $45 has an associated put option priced at $3.50. This put has

an intrinsic value of ______ and a time value of _____.
PLEASE SHOW ALL STEPS, THANK YOU!

A.) $5; $3.50
B.) $3.50; $5
C.) $3.50; $0
D.) $0; $3.50
Business
1 answer:
Rashid [163]3 years ago
6 0

Answer:

The answer is D

Explanation:

Intrinsic value can be found by simply using the following formula

Put intrinsic value = Strike Price - Current selling price

this gives,

PIV = $45 - $50 = $-5

A put intrinsic value cannot be vegetative as it can be exercised right now at the current price. Thus it is interpreted as 0.

Time value is calculated as follows

Time Value = Option Price - Intrinsic Value

This gives   TV = $3.5 - $0 = $3.5

Hope this helps.

You might be interested in
Kaylor Equipment Rental paid $75 in dividends and $511 in interest expense. The addition to retained earnings is $418 and net ne
VladimirAG [237]

Answer:

$1,269.46

Explanation:

Earnings Before Interest and Tax (EBIT) refers to the net income which is a difference between the revenue of an organisation and the expenses that were incurred in order to generate that revenue. The calculation of the EBIT is usually for a particular year and it is usually found in the Income Statement part of an organisation's financial statement.

To calculate the EBIT therefore, the Tax as well as interest must be added back to the Net Income after tax (usually added to retained earnings)

Therefore, Net Income = Dividends paid + Net Income (added to retained earnings)

= $75 + $418 = $493 - This represents a partial net income

The next step is to calculate the taxable income as follows:

The net income is $493, and the Tax rate is 35%

Taxable Income = $493/ (1-0.35) = $758.46

Earnings before interest and tax therefore =

Interest paid + Taxable Income

= $511 + $758.46 = $1,269.46

7 0
3 years ago
Teal inc., a manufacturer of designer journals and notebooks, switched to using recycled paper to manufacture its products. it a
klemol [59]
I would say that the Teal company's practices are showing concern for the environment and sustainability because using re-cycled paper means less deforestation (ie logging for trees to make paper with) and reducing use of plastic means less use of fossil fuels used to make plastic.
4 0
3 years ago
What are the 3 main factors that affect the labor market
Fynjy0 [20]
<span><span>Economy- Macroeconomic conditions affect labor supply and demand. Job losses during a recession mean less disposable income for consumers and less demand for cars.</span>
<span>Globalization-Globalization involves the import of foreign automobiles and relocation of manufacturing facilities overseas. This has led to a steady decline in U.S. automobile-sector employment.</span>
<span>Compensation- Compensation includes wages and benefits. According to an April 2011 U.S. Bureau of Labor Statistics report, there has been upward pressure on wages and downward pressure on benefits.</span>
</span>
6 0
3 years ago
Emerald Printing Company projected the following information for next year:
elena55 [62]

Answer:

$200,000

Explanation:

Selling price per unit = $60.00

Contribution margin per unit = $45.00

Total fixed costs = $150,000

Tax rate = 30%

Contribution margin ratio = Contribution margin ÷ Selling price

                                           = $45 ÷ $60

                                            = 0.75

Hence,

Break-even point =Total Fixed costs ÷ Contribution margin ratio

                              = 150,000 ÷ 0.75

                              = $200,000

5 0
2 years ago
Suppose the interest rate on a 1-year T-bond is 5.00% and that on a 2-year T-bond is 7.00%. Assume that the pure expectations th
Tasya [4]

Answer: 9.04%

Explanation:

1 year rate today = 5% = 0.05

2 years rate today = 7% = 0.07

Maturity of longer bond = 2

The ending return if the 2 years bond are bought will be thesame as the needed return on series of a year bond which will be 1.1449

The market's forecast for 1-year rates 1 year from now will be calculated as:

= 1.05(1+X) = 1.1449

1.05 + 1.05X = 1.1449

1.05X = 1.1449 - 1.05

1.05X = 0.0949

X = 0.0949/1.05

X = 0.090381

X = 9.04%

5 0
2 years ago
Other questions:
  • When the cost method is used to account for a stock investment the carrying value of the investment is affected by
    8·1 answer
  • In which step of the learning and development process does the employer identify if there are gaps in what new employees need to
    5·1 answer
  • In 2014 Electric Autos had sales of $135 million and assets at the start of the year of $220 million. If its return on start-of-
    15·1 answer
  • Ross Electronics has one product in its ending inventory. Per unit data consist of the following: cost, $26; selling price, $36;
    6·1 answer
  • Lamar has 20 Oranges and 15 Apples
    6·1 answer
  • Digital marketing isn't just about selling your products internationally. It can be used to great effect for local businesses. W
    13·1 answer
  • The Morgan Company, a small furniture manufacturer, divides its organization into marketing, human resources, accounting, and pr
    13·1 answer
  • The information below pertains to Barkley Company for 2015.
    7·1 answer
  • Cash paid for equipment would be reported on the statement of cash flows in_________.
    11·1 answer
  • What is the standard deviation of a stock that has a 10% chance of earning 18%, a 10% chance of making 11%, a 40% chance of maki
    14·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!